Q: A Client has an ex employee (from 5 years ago) that they are required to make payments to based on ruling from ERA for unpaid holiday pay. The company asked me to set this up in payroll but that seems strange. He’s not employed. They’ve been told the amounts are taxable and have given me his tax rate – what is the correct way to deal with this please?

A: A payment made from unpaid leave under the Holidays Act is an extra paid (lump sum) defined under Section RD7(3) of the Income Tax 2007

Q: Do I then need to set them up in payroll as an employee? To make these payments to them and file with ird? He has not been an employee for 5 years.

A: Yes because there is PAYE to pay on the extra pay.  So ask for a IR330.